3. Money market instruments: Negotiable certificates of deposit
Which of the following are typical negotiable certificate of deposit (NCD) maturity lengths? Check all that apply.
3 months
3 years
6 months
9 months
Which of the following are characteristics of negotiable certificates of deposit (NCD)? Check all that apply.
They provide a return in the form of interest along with the difference between the secondary market selling price and the original purchase price.
Activity in their secondary market is moderate.
Their maturities are normally between 1 and 20 years.
Their denominations are typically in multiples of $1,000,000.
Suppose Gilberto purchased an NCD a year ago on the secondary market for $993,000 and redeems it today upon maturity for $1,000,000 plus $42,000 in interest. The annualized yield on this NCD is:
4.58%
4.73%
4.93%
5.08%